Thursday, October 18, 2012

Chevron's oil-related catastrophe in Ecuador (See here and here) is now an issue in the hotly-contested Florida Senate race between Democratic incumbent Bill Nelson and his challenger, Republican Connie Mack. Chevron faces a $19 billion liability in the country for deliberately dumping billions of gallons of life-threatening toxins into the Amazon, decimating indigenous groups and causing an outbreak of cancer and other oil-related diseases.

This is the Senate race that Chevron and its friends at the U.S. Chamber of Commerce hope to buy by funneling huge dollars to Rep. Mack.

Last week, Sen. Bill Nelson attacked Mack in a television ad for letting Chevron try to help him buy a Senate seat.

Entitled "Hedge Fund Honcho," the ad goes like this:

NELSON: "I'm Bill Nelson and I approved this message."

ANNCR: "Out-of-state billionaires and special interests have spent over $20 million to buy Connie Mack IV a Senate seat.

Is it any wonder? In Congress, Mack is protecting Chevron Oil from a multi-billion dollar lawsuit over pollution of rivers and rain forests. And Mack filed a bill worth $2 billion for a Wall Street hedge fund speculator who happens to be one of Mack's biggest donors.

Connie Mack. Deep in debt to the special interests" (YouTube, 10/11).

This campaign ad says it all. Given that Chevron contributes millions of dollars to Members of Congress and congressional candidates, it moves with ease in Washington, DC. It ranks third in political donations among the Fortune 500 (and is one of the largest contributors to the U.S. Chamber of Commerce, which has spent $1.8 million to defeat Nelson.)

Not surprisingly, Chevron has harnessed a few Members of Congress to help its high-paid lobbyists push to cancel Ecuador's bilateral trade preferences in retaliation for the $19 billion judgment. (Chevron fails to mention to its allies in Congress that it wanted the litigation tried in Ecuador’s courts after it was originally filed in U.S. federal court in New York.)

Mack, who is a member of the House Committee of Foreign Affairs, has introduced a bill to nullify the trade benefits for Ecuador on behalf of his friends at Chevron. (Mack also is helping other U.S. corporate interests in Venezuela and Argentina.)

Never mind that cancellation of the trade preferences for Ecuador would mean the loss of 375,000 jobs in the South American nation. Chevron is smoking mad about being held accountable in Ecuador for its human rights crimes. Contributing to the campaign coffers of members of Congress so they will defend the indefensible is a small price to pay for the company to exact revenge against indigenous and farmer leaders in the Amazon.

Kent Robertson, Chevron's press flak, told Politico that if Ecuador’s President would just violate his own Constitution and pressure the country’s independent courts to dismiss the lawsuit, then Mack's bill would "disappear." See this article in Politico. In the criminal underworld, that’s called extortion.

This is the seventh year Chevron has engaged in a futile lobbying effort on Capital Hill to cancel Ecuador’s trade preferences because it must answer for its wrongdoing in court.

Wednesday, October 17, 2012

Rainforest villagers from Ecuador scored their first significant collection victory against Chevron’s assets this week in their attempt to enforce the historic $19 billion judgment against the oil giant after it was found to have caused cancers and environmental damage to ancestral lands in the Amazon.

An Ecuador court this week issued an order for the plaintiffs to obtain approximately $200 million in Chevron assetsin the South American country – a significant sum given that the oil giant tried to strip all of its assets from the country in anticipation of losing the litigation. In a statement released in Ecuador’s capital of Quito, the villagers also reiterated their goal of collecting the entire $19.04 billion damages award by seizing Chevron assets in countries around the world.

Among the assets ordered turned over are a $96.3 million debt Ecuador’s government owes Chevron, monies in various bank accounts held in Ecuador by Chevron and its subsidiaries, and licensing fees generated by the use of Chevron trademarks in the country. The total amount in assets could generate an estimated $200 million for the plaintiffs, who won their case in 2011 after an eight-year trial, said lawyers for the communities.

“This is a huge first step for the rainforest villagers on the road to collecting the entire $19 billion judgment,” said Pablo Fajardo, the lead lawyer for the communities. Fajardo said the assets would be used to begin to fund a clean-up of the ecological disaster left by Chevron, consistent with the mandates laid out by the Ecuador trial court.

“Indigenous people and farmers in Ecuador continue to suffer disease and death because of Chevron’s refusal to respect the rule of law in Ecuador,” said Fajardo. “This is the first example of how Chevron is losing assets as courts force it to comply with its obligations.”

Chevron trademarks affected by the court order include Texaco, Ursa, Havoline, Doro, Geotex, Meropa, Motex, Multigear, Regal, Toro, Texathern, Thuban, and others. All are used in Ecuador under licensing arrangements with local distributors, said Fajardo. Also ordered frozen are all bank accounts related to Chevron, Texaco, and any subsidiary in the country.

The $96 million debt stems from an international arbitration award in favor of Chevron related to numerous commercial disputes between the oil giant and Ecuador’s state-owned oil company, Petroecuador. Those funds will have to be transferred by the government to the rainforest villagers as part of the collection effort, Fajardo said.

Chevron operated in Ecuador from 1964 to 1992 under the Texaco brand. In February 2011, an Ecuador court found Chevron liable for deliberately dumping billions of gallons of toxic waste into the Amazon, causing an outbreak of cancer and devastating the natural habitat relied on by thousands of villagers. Numerous independent studies have found thousands of people have died or are likely to die due to Chevron’s pollution. Seehere,here, and here.

A video on the case can be seenhere; a written summary of the evidence can be read here; and a 60 Minutes segment on the case can be viewed here.

Chevron has the right to oppose the order, which was issued ex parte to prevent Chevron from selling or removing its assets before they could be frozen. If Chevron opposes the order, the trial has to either modify or ratify his original ruling. That job is considered largely ministerial given that the judgment from the long-running lawsuit has been affirmed on appeal and Chevron refused to post a security bond preventing enforcement of the judgment, said Fajardo.

Separately, the Ecuadorian villagers in May and June filed seizure actions in Canada and Brazil targeting billions of dollars worth of Chevron assets, including refineries, offshore oil platforms, and oil production facilities. The Canadian court, located in Ontario, has scheduled an initial hearing for late November.

The environmental trial was held in Ecuador at Chevron’s request after the company filed 14 sworn affidavits in U.S. federal court attesting to the fairness of the nation’s judicial system.

The court order, signed by Judge Wilfrido Erazo in the Sucumbios Provincial Court, continues a downward trend for Chevron in the legal case since it hired the U.S. law firm Gibson Dunn & Crutcher in 2009 to “rescue” it from the impending Ecuador liability.

In recent weeks, the U.S. Supreme Court denied its attempt to block enforcement of the judgment; several shareholders with an estimated $580 billion in assets under management urged the company to settle the case; and, a U.S. Congresswoman and other large shareholders asked the SEC to determine whether Chevron CEO John Watson and General Counsel R. Hewitt Pate are lying about the Ecuador case to investors. See here, here and here.

The Ecuadorian rainforest villagers plan to file additional seizure actions against Chevron in other countries in the coming weeks, said Fajardo, the recipient of the CNN “Hero” Award for his work on the case.

He added that key Chevron targets are located in countries in Latin America, Africa, and Asia.

Monday, October 15, 2012

Wall Street analysts rarely take controversial positions on publicly traded companies whose stock is doing well. But Chevron’s mishandling of its $19 billion liability in Ecuador for dumping toxins into the Amazon is beginning to look like the exception, at least to the analysts at Seeking Alpha and a commentator at the influential proxy advisor Glass Lewis.

One thing is indisputable: cracks are beginning to appear in Chevron’s determined effort to keep Wall Street in line with the idea that the Ecuador judgment represents no short-term threat to the company’s financial position. One analyst even predicted the lawsuit eventually could lop as much as 20% off the company’s share price. Even worse, the U.S. Supreme Court just dinged Chevron’s final attempt to block enforcement around the world.

Some of these analysts are beginning to get that the judgment in Ecuador – from the very court where Chevron wanted the issues resolved– is based on overwhelming scientific evidence that proves Chevron committed what is probably the largest oil-related environmental disaster in world history. See here and here.

The fact that the plaintiffs now have launched seizure lawsuits targeting billions of dollars of Chevron assets in Brazil and Canada certainly takes the idea of litigation risk for Chevron to new and unchartered territory, leading one analyst to advise shareholders to dump the stock for now. Further, numerous U.S. courts, including the Supreme Court, recently denied Chevron’s increasingly desperate attempts to derail the litigation while several institutional shareholders and a U.S. Congresswoman have asked the SEC to investigate the company for lying about its Ecuador risk.

Consider the various analyses from Seeking Alpha, an award-winning website for stock research that has more than 800,000 followers. Kiplinger’s recently named Seeking Alpha the Most Informative Website; it also received a “Best of the Web” award from Forbes.

“Canada has a reputation for fair legal proceedings. This will make it incredibly difficult for Chevron to continue claiming that the lawsuit is based on fraud. I think it is highly unlikely, furthermore, that fraud is the reason for the charges against the company. In fact, I think that these recent developments may be the start of a downward trend for the company that it will struggle to recover from.”

Another Seeking Alpha analyst, David White, said just this week that Chevron shareholders should sell. In a blog, entitled Chevron Can't Seem To Turn The Bad News Faucet Off, White devoted his entire analysis to all of Chevron’s many legal problems in Ecuador, Brazil and the company’s own home state, California. Federal and state criminal prosecutions and hefty fines are a possibility due to safety problems at a refinery in Richmond, a small city just across the Bay from San Francisco. White wrote:

“…with all of these unexpected costs that CVX is facing, I think it is time to unload this historically strong, steady dividend payer….If you own CVX, it is time to sell it.”

Another Seeking Alpha analyst wrote that Chevron is “losing support from all corners”in its bid to evade the Ecuador judgment. He also highlighted the growing number of courtroom setbacks suffered by Chevron’s legal team at Gibson Dunn & Crutcher, which was brought in two years ago to “rescue” the oil giant from its impending liability.

The analyst also reported concerns about the lawsuit from both shareholders and Members of Congress, writing that many of Chevron’s institutional investors have “made it clear … that a settlement is the preferred course of action, as it appears increasingly unlikely that Chevron will be able to avoid paying out a significant portion of its available cash over this lawsuit.”

“Although I believe it is in Chevron's best interests to settle the suit, this may represent a huge hit for the company, which I think could force its price per share as low as $80, a level not seen since 2010,” the analyst concluded.

Another Seeking Alpha analyst wrote that the $19 billion liability in Ecuador and a separate $20 billion potential liability in Brazil resulting from an oil spill there in 2011 is “cast(ing) a long shadow” on Chevron’s stock, which “could tumble” as a result.

He wrote:

“Chevron is continuing to build its cash balance, which now stands at $21.1 billioncompared to $15.8 billion at the close of 2011. I think that fears over suits brought against it in Brazil and Ecuador, despite a Chevron show of bravado in casting these litigations as fraud, are contributing to Chevron's rapid accumulation of cash.”

Noting that other oil majors give dividend increases, buy something and/or pay down debt when they have that much cash, the analyst projected that “it’s unlikely that its cash balance will be substantially drawn down until both of these super-suits are settled or dismissed, which could be a matter of years.” That was written in early September. Chevron has yet to do anything with its huge surplus.

The analyst wrote that the liabilities in Ecuador and Brazil together “could wipe out Chevron's healthy cash balance as well as a significant portion of its equity. This in turn would lower Chevron's outlook across the board. Chevron is a comfortable hold, but a risky buy in the current environment.”

“As these legal battles consume considerable company resources and leave the company exposed to significant risk, shareholders should continue to remain vigilant in ensuring that Chevron is managing and disclosing these issues properly and sufficiently.”

Another analyst, Fadel Gheit at Oppenheimer & Co., following a meeting with Chevron's CEO John Watson in 2011, wrote that "a $2-3B settlement [in the Ecuador lawsuit]... could remove uncertainty and reflect positively on the stock.” Later, in May of this year, after the Ecuador trial judgment was upheld on appeal, Gheit doubled-down on his belief that "a reasonable settlement with the plaintiffs impacted by the oil contamination in Ecuador...could boost the stock.”

Gheit is generally pro-Chevron and he has written about the case in ways that suggest he does not fully understand how the legal process works. His recognition that Chevron now faces real liability is yet another example of the how company is beginning to lose some of its allies on Wall Street.

Wednesday, October 10, 2012

Ted Olson needs to learn that it’s hard to put lipstick on Chevron’s pig in Ecuador.

In yet another setback for Chevron, the U.S. Supreme Court this week declined a petition signed by Olson to restore the unprecedented global “injunction” obtained last year by the company purporting to block enforcement of the $19 billion Ecuador court judgment. That injunction – imposed by controversial federal Judge Lewis A. Kaplan – provoked an uproar in the international legal community and was unainmously reversed by the Second Circuit Court of Appeals.

Chevron General Counsel R. Hewitt Pate then brought in his friend Olson, the former Solicitor General of the United States and the mastermind behind more than 50 Supreme Court arguments (including the winning side in Bush v. Gore). Olson asked the Court to take the radical step of summarily reversing the Second Circuit ruling without argument or briefing.

Instead of acceding to Olson’s unusual request, the Court decided not even to ask for briefs or argument as it would in a typical case. It just flat out rejected the original request, and also rejected Olson’s backup plan to file briefs -- all without as much as a comment.

This is the ultimate rebuke not only to Chevron and Olson, but also to Judge Kaplan. Kaplan's global injunction -- the crown jewel of Chevron's defense to enforcement -- is now officially dead.

One must ask if Olson really understands the extent to which his new client committed human rights violations against indigenous groups on a mass scale in Ecuador's rainforest. To understand the extent of Chevron’s misconduct in Ecuador, see this video, this 60 Minutes segment, and this report from a highly-rated Australiannews show.

The disaster in Ecuador was not an accident, like BP’s Deepwater Horizon spill in 2010. Chevron designed its system of oil extraction in Ecuador to pollute, and pollute it did – to the tune of 4 million gallons of toxic waste dumped daily in to Amazon waterways for roughly two decades. (Chevron operated in Ecuador from 1964 to 1992 under the Texaco brand.) Environmental lawyer Robert Kennedy visited the area in the late 1980s and wrote of witnessing an apocalyptic environmental disaster.

In his petition, Olson presented the Justices with Chevron’s "blame the victim" narrative that the indigenous groups and their U.S. counsel somehow defrauded the oil giant by filing the lawsuit. After reading thereply of the Ecuadorians -- where Chevron is hung by evidence from its own corporate files that it committed gross wrongdoing -- the Justices clearly were not moved by Olson's pleading.

By denying Chevron, the Justices now have joined with 18 U.S. federal trial court judges and four federal appeals courts who haverejected Chevron's fraud claims in whole or in part in various litigations over the last two years.

The Supreme Court decision is also the latest blow to Olson’s law firm, Gibson Dunn & Crutcher. Chevron hired the firm in 2009 to “rescue” it from the impending Ecuador liability. Not only did Gibson Dunn lose the largest environmental case ever, it has continued to pile up losses for Chevron in various trial and appellate courts in the U.S. and Ecuador. It's fast approaching Tebow Time for Chevron but there appears to be no Tebow on the roster.

Another big loser with the Supreme Court decision is Gibson Dunn’s self-anointed “mob prosecutor” Randy Mastro, who now has lost every argument he ever made on behalf of Chevron before a U.S. appellate court. Mastro, the leader of the Gibson Dunn rescue mission, had found a willing audience in Judge Kaplan in New York. But Kaplan now lacks any power to block the judgment, thus severing the rescue operation's last lifeline in the U.S.

At this point, Kaplan’s open biases against the Ecuadorians are so well-documented that they could well provoke a backlash against Chevron inforeign courtsbeing asked toenforce the judgment. Judges generally don't like to be told by courts of other countries what they can and cannot do. That's not good for comity, international relations, or the image of the U.S. judiciary as a whole.

Much of Chevron's misconduct and fraud in Ecuador is documented in chilling detail in the affidavit of Juan Pablo Saenz and the lawsuit filed against Chevron by the longtime legal counsel for the Ecuadorians, Steven Donziger. These documents provide a taste of how desperate the company has become to avoid being held accountable for the wanton destruction it caused in Ecuador.

Look for Olson and his partners to continue to exploit the billing opportunities provided by their increasingly futile legal odyssey -- one that also has sparked a shareholder rebellionagainst their ultimate client, Chevron CEO John Watson. Let's not forget as well the calls by shareholders and a U.S. Congresswoman for anSEC investigationto determine if Watson is lying to downplay the Ecuador risk.

Ted Olson is without question a brilliant lawyer. Watson will certainly pay for the next batch of lipstick for Gibson Dunn to try to smear over the lips of the Ecuador judgment. But that pig is not getting prettier.